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The Distribution and Dispersion of Debt Burden Ratios Among Households in Poland and its Implications for Financial Stability

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  • Dawid, Żochowski
  • Sławomir, Zajączkowski

Abstract

Debt burden ratio as measured on the aggregate level does not give an adequate assessment of the ability of the household sector to repay its debt. The low level of financial deepening in Poland is primarily reflected in a low percentage of households that have been granted a loan. Therefore, the average debt burden for households, which have any debt outstandings could be much higher than the one measured on the aggregate level. If the debt is concentrated among groups of households with lower incomes, it can threat the financial stability in case of FX or interest rate shocks. Using the data from Polish Households Budget Survey we first define three different measures of debt burden and calculate its dispersion in time and distribution among income groups. We find that (1) the total debt service burden and loan service burden ratios are on lower levels than in other European countries and recently have not risen substantially, (2) the mortgage debt service burden ratio has been rapidly increasing in the last four years especially in lower income groups of households reaching in 2004 the 3/4 of the level noted in EU-15. In comparison with EU it seems that the level of indebtedness of house- holds in Poland is on a secure level. However, we notice that the secure level of debt burden ratio is on a lower level in emerging market countries than in wealthier countries because of the higher share of basic living costs in total consumption expenditure. Therefore, the increasing levels of mortgage debt service ratios in lower-income groups could pose a potential threat to the financial stability in case of FX or interest rate shock.

Suggested Citation

  • Dawid, Żochowski & Sławomir, Zajączkowski, 2006. "The Distribution and Dispersion of Debt Burden Ratios Among Households in Poland and its Implications for Financial Stability," MPRA Paper 692, University Library of Munich, Germany, revised 19 Oct 2006.
    • Handle: RePEc:pra:mprapa:692
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    References listed on IDEAS

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    1. Jerzy Pruski & Dawid Zochowski, 2006. "Changes in the financing structure of the real economy in Poland - challenges for the banking sector," BIS Papers chapters, in: Bank for International Settlements (ed.), The banking system in emerging economies: how much progress has been made?, volume 28, pages 313-25, Bank for International Settlements.
    2. Gergely Kiss & Márton Nagy & Balázs Vonnák, 2006. "Credit Growth in Central and Eastern Europe: Convergence or Boom?," MNB Working Papers 2006/10, Magyar Nemzeti Bank (Central Bank of Hungary).
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    Cited by:

    1. Alena Bicakova & Zuzana Prelcova & Renata Pasalicova, 2010. "Who Borrows and Who May Not Repay?," Working Papers 2010/10, Czech National Bank.
    2. Marco FRIGERIO & Cristina OTTAVIANI & Daniela VANDONE, 2018. "A Meta-Analytic Investigation of Consumer Over-Indebtedness: the Role of Impulsivity," Departmental Working Papers 2018-08, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    3. Adam Głogowski, 2008. "Macroeconomic determinants of Polish banks’ loan losses – results of a panel data study," NBP Working Papers 53, Narodowy Bank Polski.
    4. Pradeep Mitra & Marcelo Selowsky & Juan Zalduendo, 2010. "Turmoil at Twenty : Recession, Recovery, and Reform in Central and Eastern Europe and the Former Soviet Union," World Bank Publications - Books, The World Bank Group, number 2682.

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    More about this item

    Keywords

    Financial stability; debt burden; sebt service burden; haousehold indebtedness;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G0 - Financial Economics - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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